Fluor Corp (FLR) 2007 Q4 法說會逐字稿

Good day, everyone. Welcome to today's Fluor Corporation fourth-quarter conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's presentation. There will be a replay of today's conference call at 12.30 PM Eastern Time today accessible on Fluor's website at www.Fluor.com. The Web replay will be available for 30 days. A telephone replay will also be available through 12 midnight Eastern Time on March 6 at the following telephone number, 888-203-1112. The pass code of 605-5684 will be required.

At this time for opening remarks and introductions I would like to turn the call over to Ken Lockwood, Vice President of Investor Relations. Please go ahead, Mr. Lockwood.

Thank you, operator. Welcome, everyone, to our fourth-quarter and 2000 year-end conference call. With me today in the room are Alan Boeckmann, Fluor's Chairman and CEO; Mike Steuert, Fluor's Chief Financial Officer; and also joining us today is David Seaton, our Group President of Oil & Gas.

Our earnings announcement was released this morning before the market opened. We have also posted a slide presentation on our website which the presenters will reference during their prepared remarks on today's call. Our Form 10-K will be filed tomorrow.

Before getting started I would like to read our cautionary note regarding forward-looking statements which is summarized on slide 2. In discussing certain subjects, we will be making forward-looking statements regarding projected earnings, market outlook, new awards, margins, tax matters, and other statements regarding the intent, belief, or expectations of Fluor and its management. These forward-looking statements reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially.

These differences could arise from a number of factors. Information concerning these factors that could cause actual results to differ materially from the information that we give today is available in our Form 10-K filed on March 1, 2007, which is available online or upon request.

We will be updating these factors in our Form 10-K, our new Form 10-K, which we intend to file tomorrow. Once filed, it will also be available online or upon request.

The information in this conference call related to projections or other forward-looking statements may be relied upon subject to this cautionary note as of the date of this call. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or for any other reason.

Now, I would like to turn it over to Alan Boeckmann, Fluor's Chairman and CEO. Alan?

Good morning, everybody and thanks. Today, we will be reviewing our results for the fourth quarter and full year of 2007. We will be providing an update on our current business outlook and discussing our increased earnings guidance for 2008.

But before we get to the specifics let me just say that the fourth quarter and the full year of 2007 surpassed virtually all previous financial records. Fluor delivered record revenue, record operating profit, record earnings, record new awards, and record backlog. With $1.7 billion in cash and marketable securities, our balance sheet has never been stronger.

2007 was without a doubt the best year in the Company's history. And I am glad to add the qualifier, so far.

Now I want to cover some highlights of our financial performance in 2007. For your reference, I'm on slide 3.

Net earnings for 2007 rose 102% to a record $533 million or $5.85 per diluted share. That compares with $263 million or $2.95 per diluted share in 2006.

In addition to very strong operating performance, net earnings in the fourth quarter included $123 million or $1.35 per diluted share from a final settlement of a tax audit for certain prior years.

The full-year results reflect extremely strong growth in Oil & Gas, Global Services, Industrial & Infrastructure, and Power segments; and also improved performance in our Government segment.

Consolidated operating profit for the year was $802 million, up 44% from $556 million a year ago. Revenue for the year rose 19% over 2006, to a record $16.7 billion.

As I move to slide 4, full-year new awards for Fluor overall rose to an all-time high of $22.6 billion, up from $19.3 billion a year ago. It was driven by increases in Oil & Gas, Power, and Global Services.

Fourth-quarter new awards of $6.3 billion set a record for a single quarter and drove backlog to $30.2 billion, the Company's ninth consecutive quarterly increase and up 38% from the end of last year.

I want to make a few comments on our markets and prospects going forward. Despite all of the concerns of a potential recession in the United States and the ramifications for global markets, we have not seen evidence that investment in our key projects that are in our backlog, or key prospects for that matter, are at risk. The fact that some projects experience delays due to cost escalation is not a new factor; and we expect that will continue to some extent.

Let's talk a little about the markets, though, in each of our segments. I'm going to refer to David Seaton here to provide you a quick snapshot of Oil & Gas. David?

Thank you, Alan. On the slide, I am turning to slide 5. Oil & Gas will continue to be very significant part of Fluor going forward. 2008 will again be heavily driven by investment in refining, followed by petrochemicals including the polysilicon market, and then upstream.

First, in downstream we expect this market to continue to be strong in the US, Europe, Middle East, and South Africa. We continue to be very busy executing front-end engineering and design contracts, which give us a pretty good visibility into the new award flow over the next 12 to 18 months.

There are some very large projects where we announced FEEDs, or front-end engineering project awards in '07, where the full EPC values are not yet in backlog. This includes refining projects in Russia, Europe, as well as other US refining projects. We expect these projects and others to go ahead in 2008.

In the petrochemicals area, the ethylene cycle is slowing down, as we expected. But there are a number of large opportunities in chemicals, specialty chemicals in the Middle East, China, and to a lesser extent Europe.

An example of what is happening in the US is a front-end design project that we're doing for Eastman Chemicals on a gasification plant in Texas.

On the polysilicon side, we continue to see substantial investment around the world and are very excited about the opportunities that continue to develop, giving our excellent market share and position.

Finally in upstream, substantial investments are planned in the Middle East, Russia, and Canada, as examples. A lot of these relate to develop of gas resources as well as onshore and offshore production facilities.

However, we're going to focus on the opportunities where we can bring our major project management capabilities to bear. We are going to be very selective as we go through these programs, to make sure that we have the resources available to execute the programs for our customers. Alan?

Thanks, David. We're on slide 6 now for your reference. On the power front, we grew the backlog substantially in 2007 and have numerous prospects across coal, gas, and plant betterment projects in 2008.

But as you have heard, all of the discussion on carbon emissions, global warming, and the potential environmental impact is having a delay on some of the major investments in this market. In fact, the Desert Rock coal-fired plant has slipped out towards the end of 2008 based on the current view of when they will receive their environmental permit.

Issues on the coal-fired side have clearly caused a pickup in prospects, though, on the gas-fired generation projects.

In Industrial & Infrastructure, mining remains strong, especially copper and iron ore. In Infrastructure, we expect to book the Greater Gabbard Wind Farm during 2008 as well.

Life sciences continue to be soft, although we are pursuing some midsized opportunities in that market.

As we move to the Government segment on slide 7, we have been talking about three key opportunities here. To date we're batting two for two, with awards of both LOGCAP IV and Savannah River. As you know, both projects are currently entangled in a protest process. But the important point is that we said these jobs were key, and we went out and won them against very strong competition. I am encouraged by this group's success, and we look forward to hearing about Sellafield, the third and largest opportunity, later this year. We expect the protests on the previous two to be resolved in the near term.

Global services continues to be very effective at renewing existing contracts and expanding their services offerings globally. We expect new bookings in 2008 to be at least on a par with 2007 in this market.

Lastly from a broad perspective, we believe that our business model of broad industry and geographic diversity continue to benefit Fluor and have allowed us to amass a quality $30 billion backlog, the great majority of which is for contracts that are cost-plus.

With that, let me turn the call over to Mike Steuert to review additional details of our operating performance, our new awards, and other financial information.

Thank you, Alan, and good morning. First, let me provide you with a brief recap of the results for each operating segment. Please turn to slide 8 of the presentation for this.

Fluor's Oil & Gas segment reported a 42% increase in operating profit, which totaled $433 million for the year. As expected, revenue continues to ramp up, increasing 56% during the year to $8.4 billion. New awards for the segment totaled $13.5 billion for 2007, a 30% increase over last year, driven mainly by sizable downstream refining awards.

The fourth quarter totaled over $4 billion including a $1.5 billion EPC contract for Marathon's Detroit refinery upgrade and an EPC (inaudible) program management contract for Repsol's Cartagena refinery expansion. Ending backlog for Oil & Gas rose to $18.5 billion, a very strong 54% increase from $12 billion a year ago.

Fluor's Industrial & Infrastructure segment reported operating profit of $101 million, up 32% from $76 million in 2006. The fourth quarter included a $10 million charge relating to the further cost escalation on the highway project in California. While the roadway is open for traffic and in use, we continue to work on landscaping, on sound walls, and on punch list items which will likely carry through into the second half of 2008.

New awards totaled $3.4 billion for the year. The largest award in the fourth quarter was a $1.3 billion EPC contract for the high-occupancy toll lanes along I-495 for the Virginia Department of Transportation.

Year-end backlog in this segment rose to $6.1 billion, an 11% increase over 2006.

Moving on to slide 9, the Government segment posted operating profit of $29 million, (technical difficulty) from a year ago. However, the segment's 2006 results were adversely impacted by substantial loss positions on fixed-price contracts.

As expected, revenue declined to $1.3 billion from $2.9 billion last year, mainly due to substantially lower levels of disaster relief activities, for FEMA, lower Iraq reconstruction activity in 2007, and the completion of the Department of Energy contract for Fernald in 2006.

There were no (technical difficulty) provisions taken in the Government segment in the fourth quarter for either the embassies or for the Bagram program.

New awards totaled $1.2 billion for the year, but did not yet include any values for LOGCAP IV, where Fluor was awarded a contract, as Alan mentioned. That has been delayed pending resolution of the formal protest.

In addition, as you know, in January 2008 a Fluor-led team was awarded the Department of Energy contract to the Savannah River, which is also being delayed pending resolution of a formal protest.

Moving on to Global Services, operating profit in the Global Services segment grew by 32% in 2007 to $201 million, up from $152 million a year ago, reflecting strong performance across all elements of the segment.

Global Services continues to perform very well and is our largest earnings contributor behind Oil & Gas. Full-year new awards of $2.2 billion are up 39% over 2006.

The fourth quarter included new contracts and renewals and extensions of existing contracts, all which brought year-end backlog to $2.5 billion.

Moving on to slide 10, Fluor's Power segment reported operating profit of $38 million, a substantial improvement over $4 million in 2006. Unit revenue more than doubled to $1.2 billion, reflecting strong new awards and progress on power generation as well as plant betterment projects.

New awards in 2007 total $2.2 billion, including two 800-megawatt coal-fired power units in Texas. New awards in the fourth quarter were driven by additional plant betterment programs.

Backlog in the Power segment was $2.4 billion at year end, up from $1.3 billion at the end of last year.

As Alan mentioned, Fluor's consolidated backlog now stands at a record $30.2 billion, of which $2.3 billion increased -- which represents a $2.3 billion increase over the last quarter.

The percentage of fixed-price work for the backlog remains at 24%; and about 44% of the backlog is for projects in the US, with 56% for projects outside of the United States.

Let me now move on to some corporate items that are shown on slide 11. Corporate G&A expense for the year was $194 million, up from $179 million a year ago. This increase is mainly due to higher incentive and stock-based compensation costs.

We had net interest income of $41 million for the year compared with net interest income of only $4 million last year.

The effective tax rates for the fourth quarter and the year were impacted by a significant audit settlement with IRS. In the fourth quarter, the Congressional Joint Committee approved an audit settlement for the 1996 to 2000 period. This settlement resulted in a positive $123 million earnings impact and approximately a $15 million cash refund.

A couple more comments on taxes. We do expect the normalized tax rate to remain in the 37% to 38% range. However with the new accounting rules, in particular FIN 48, we could see some variability in tax rates on a quarter-to-quarter basis as we go through 2008 and beyond.

Shifting to the balance sheet, the consolidated cash and marketable securities balance moved up to $1.7 billion at year end. For the full year, cash rose by over $700 million, with $900 million of cash flow coming from operating activities.

Our Board approved a 25% increase in our dividend recently, bringing the quarterly dividend rate to $0.25 per share payable on April 2, 2008.

As you may recall, in 2005 we won the National Roads Telecommunications project in the UK, with Fluor having a 45% interest in GeneSYS Ltd. We consolidated the accounts of this joint venture in our financial statements through the third quarter, with the most visible result of this being the inclusion of entity's nonrecourse debt.

Late in the third quarter and in the fourth quarter of 2007, the newly-constructed network achieved operational status; was fully accepted by the client; permanent financing was put in place; and we entered the O&M phase. As a result of all of this GeneSYS is no longer consolidated in the Company's accounts after December 31, 2007, and is now being accounted for on equity method of accounting. As a result, our debt to total capital ratio was reduced to 13%.

Capital expenditures for the year were $284 million, with the majority attributable to our continued investment in our equipment services business; some additional investment associated with expansion of our workforce; and the required related infrastructure. Depreciation for the year was up to $145 million.

Overall, Fluor's financial condition remains extremely strong and continues to further strengthen.

Finally, let's talk a little bit about guidance for 2008 which is on slide 12. As is evidenced by the strength in our fourth-quarter new awards at $6.3 billion, we continue to be very successful at winning major new contracts projects across all of our diverse markets that we serve.

We expect to see ongoing strength in downstream Oil & Gas, polysilicon production, power generation, and pollution reduction, mining, and operations and maintenance. Recent project wins in the Government segment are also very encouraging, although not expected to have a material impact until sometime in late 2008.

In summary, as a result of the strong fourth-quarter new awards and the very positive operating performance, the Company is raising its guidance for 2008 to a range of $5.10 to $5.50 per share from the previous range of $4.90 to $5.30 per share.

With that, Alan, David, and I would be very happy to respond to questions.

(OPERATOR INSTRUCTIONS) Jamie Cook with Credit Suisse.

Good morning and congratulations. I'm actually, I think, speechless on the quarter for once.

I guess my first question, just, Mike, was there anything unusual in the Power segment? The margins there were pretty good. I'm just trying to think about how I should think about that going forward, I guess.

There is nothing, I would say, unusual. The Power did have a very strong segment in the fourth quarter. But I wouldn't say there was anything unusual, Jamie.

But is that a normal trend that we should think -- I mean, that is not something we should think about going forward in terms of a margin for '08?

No, I -- Power will definitely have a very solid year in '08, but I don't think you can take the fourth quarter and really annualize it. I think you have to look at a run rate slightly less for the total year.

Okay. Then I guess my other question is on the award outlook for Oil & Gas in 2008. It sounds like there's a lot more going on, on the downstream side. Or I guess more than I thought.

I guess as I look to 2008, should I look of 2008 as a bigger award potential on downstream than on the upstream? So probably you are doing more FEED work now and it materializes more in 2009? I'm just trying to think about the shift in those markets, I guess.

Jamie, this is David. Basically what we are seeing is work that was awarded in '07 being released in '08. I think we had a tremendous new award year in '07, and I think we can see consistent new awards in '08.

What about on the upstream side? I'm sorry.

Well, I was thinking more in the entire portfolio. Upstream I think will grow at an equal rate to the other units. We are seeing a lot of success in some of the front-end work; typically, offshore and onshore gas and oil production globally.

Okay. Then I guess just my last question, Alan, can you just give a little more color on what you are seeing on the Power side? In particular, gas. Sort of color on the number of projects out there you are bidding on; and potential for awards in 2008; and whether outside of what you have already won in coal. We're sort of dead on the coal side, I guess.

Well, yes, Jamie, it is possible that we will have two awards in coal in '08. We think we one is likely; on the outside chance there may be two.

But what is happening, because of the difficulty in getting air permits, we are seeing a tremendous surge in people coming into ask for gas generation, fired generation, simply because they have got to be able to meet some of the energy demands in some of these regions. That is the only way that they can now get a permit and get a unit on the ground quickly.

So we are seeing a lot more activity there than what we have seen in the past or what we actually, frankly, though we would see.

Do you expect (technical difficulty) awards in '08, just to be clear?

Yes, we do.

Okay, thanks. I will get back in queue. Congratulations.

Michael Dudas with Bear Stearns.

Good morning, gentlemen. Two questions. First, Alan, the Global Services business kind of being a sneaky business in the big portfolio for Fluor, very good results.

Attribute some of the success there. Is it the outsourcing trend? Is it the deeper customer relationships on contracts that you have already built, that EPC work and then following through into the maintenance side? Is there been a big uptick in demand from your customer base to do some of the lower-tech maintenance and operations at the plants?

Could you color that and see what kind of sustainable trend we have in the Global Services area?

Well, you know, Global Services, if you look back at their record over the last several years, it has been growing at a fairly steady rate and a very good rate.

It is a couple of drivers there, Mike. First of all, they do get a boost from the other Fluor activities, because they do provide services to the Fluor units. But they also have an extremely strong third-party market that is being driven a lot by the outsourcing, particularly in the construction equipment unit and in the operations and maintenance side.

So it is a very solid business. It is one that is extremely complementary to the rest of our business. Works very well within Fluor and has a very strong value proposition outside.

I think we are going to continue to see it grow as we go through '08 and beyond.

So AMECO has been doing quite well?

They are doing well.

My second question is for you or for Mike. You addressed the balance sheet cash of $1.7 billion.

How much does Fluor require for either bonding or for customer purposes?

What was your view throughout 2007 relative to acquisitions? Maybe remind us what you have been targeting and how the market might be there.

Do you think there is a chance that we see some reasonable allocation of capital into that market in 2008 from Fluor?

Let me address one issue then I will let Mike talk about the cash balance. We really didn't do any acquisitions of note in 2007. Not that we were not looking; we're continuing looking for the right opportunity for acquisitions.

We just have put a very strong discipline in place about going for those that are accretive; and in the market today valuations are very high. So as a result, we went through the year without executing one.

We are looking at some opportunities and some possibilities. So I wouldn't rule that out for 2008. Mike?

Yes, in terms of our cash balance, given some of our restrictions by our JV agreements, we need to operate both in the US and overseas. We view, Mike, that we need about $600 million in terms of for normal operations. So you could say that we roughly have about $1 billion above what we need as a Company.

We did increase our dividend. We are looking at share repurchases to offset the creep in number of shares in terms of dilution there, as well as acquisitions.

But as Alan said, we are going to be very deliberate in terms of how we look at these actions. We're going to make investments only when we find them compelling.

So we certainly expect to continue to build our cash position through the cycle, and we are going to continue to look for very attractive uses of that cash as we go through the cycle. But in the meantime, we certainly want to see our balance sheet continue to strengthen and continue to have the strongest balance sheet in this industry.

What about your thoughts on '08 capital spending trends versus depreciation? Is there anything on the horizon that could meaningfully impact that?

No, our outlook for CapEx is very similar to '07; perhaps maybe a little bit lower than '07. We will see some investments in our equipment business; and will see some investments in again continuing to support the kind of growth in our infrastructure, to support the growth the Company is seeing overall.

But I would expect our CapEx in '08 to be in the $200 million to $250 million range, Mike.

Thank you, gentlemen.

Curt Woodworth with JPMorgan.

Hi, good morning. Question for David. You commented that on a downstream side you thought some of the FEED work you are doing right now will go (technical difficulty) project management role. You mentioned Russia, Europe, and the US.

Could you just characterize the market opportunity there? Would you say that that potential would be similar to what you did in 2007, which was obviously a very strong year?

Well, I think downstream is going to continue to be robust. There has been a significant amount of spend early in this cycle in the United States. I think we have been positioned to capitalize on a lot of that. That will continue to flow into our backlog in '08.

But we also are very well positioned globally. When you think about our global reach and our major project management capabilities, we see the same sort of spending trends in other parts of the world.

I mentioned Russia, I mentioned Europe to a degree, but Asia is right behind it. When you think about the fuel specs, the global fuel specs that are being required in many of the countries around the world. So I would categorize the downstream market as continuing to be robust. I don't see it waning during '08.

Okay, in terms of maybe thinking about the -- you talked about the geographic mix. Is the front-end work, say relative to a year or a year and a half ago, are you seeing a larger shift towards international projects relative to the US?

You know, the US has been such a big part of that growth spurt, I wouldn't categorize it as larger, but certainly consistent with.

Great. Just last question on the polysilicon. Could you try to frame that market opportunity for us? How much do these plants cost? What is the opportunity for you?

You know, the market, I think when you look at some of the alternative energy sources, this is a key part of that. This is a precursor to the photocell that we all have in calculators and telephones and everything else. So the demand on the consumer side is extremely strong, and many of our customers are continuing to spend.

I really wouldn't venture a comment on a cost per copy because they are using different technologies, different capacities based on their end consumer user. But it is a large component of our backlog, and we see it continuing to grow as we go through '08.

What percent of the backlog would it be?

I wouldn't venture to guess that one either, because it is in varying stages of development from a FEED to the EPC values.

Okay, great. Thank you.

Steven Fisher with UBS.

Good morning. Wondering how you factor [Sellafield], LOGCAP, and Savannah River into your guidance? It sounds like there are some uncertainties. But it also sounds like you expect some of them to contribute in the latter part of the year.

Yes, as we look at 2008, the impact of those is very modest, if any, in our guidance for 2008. We expect those to support the Government group through 2009 and beyond. I would -- our current estimate is the first major impact of those will really show up in 2009.

Okay, great. Then you mentioned that there were no further charges on the Bagram Air Force Base and the Haiti Embassy. But wondering if you could just give a little more color on the status of those projects.

Well, at Bagram we have turned the facilities over to the military and have destaffed that project, so we're pretty much done there.

On Haiti, a good portion of that Embassy is now turned over to the client. It is virtually done. We will be out of there, I would venture, sometime in March. So in good position on both projects.

Great. Just one last quick one. Wondering if you are pursuing any or you might pursue any project in the LNG area in Asia geographic region.

We are in the LNG business. We do regasification projects, and we do program management, offsites, and infrastructure for the front-end work of LNG, for the coal side. Certainly, we would be pursuing those as appropriate in Asia.

Okay, great. Thanks a lot.

Andrew Kaplowitz with Lehman Brothers.

Good morning, guys. Nice quarter. Can you talk about the global mining markets in general?

Obviously you guys are very strong on project management in that space. It seems like there is a real global shortage here of mining, and commodity prices are still very high. So can we expect big projects in the mining segment over the next couple of years?

Well, you know, we have had a good run in mining over the last several years. We are very strong in project program management. We also have a pretty strong capability technically, particularly when it comes into the copper market in mining, into the precious metals side, and into the iron ore side. That has made up the bulk of our awards.

We see nothing in the next year or two that is going to stop the development that is going and some of the front-end work that we are doing kind of shows that.

How long that cycle is going to go, it is hard for me to say. It can be very volatile; but right now it looks strong.

Great. Alan, your Oil & Gas margins had a nice uptick in the quarter. I know that it is lumpy. So I guess the question is, where do we go from here?

(technical difficulty) sustain the margins that we have here as you still have projects ramping up?

I think you said one of my favorite words, and that is lumpy. It does -- it will differ from quarter-to-quarter just simply by the mix of work, where each of the projects are.

But I think if you look at where we're at today, this (technical difficulty) very strong quarter. We should be able to do close to that. I am not sure if we would be able to repeat that every quarter going forward.

Understand. Then any activity in the nuclear space? Above and beyond -- obviously you had some news on that late last year. Anything else that you guys are doing there? Anything that you see out there in the sort of near to medium term?

We have got -- starting to put a pretty good staff of the front-end work for the South Texas project. That is the one that is getting our major focus right now, because that is going to be probably the first one through the NRC line. It is going to take a tremendous amount of development over that time to get that license.

I think you're going to see others come in behind it, and we are focused on several. So I'm hopeful that when we get into -- truly into the next decade, this will be a strong market for us with a lot revenue generation to show for it.

Okay, thank you very much.

Barry Bannister with Stifel Nicolaus.

Great quarter. One question on the escalating costs for power generation facilities going on around the world. How comfortable are you with the fixed-price portion of the Texas coal plant you are working on?

Is your Oil & Gas executive seeing improved pricing discipline given that some overseas E&Cs have been burned by prior fixed-price bids?

Well, let me talk about the Power first; then I will let David answer the last part of your question.

Every Power project that we have done, including the one in Texas, was a negotiated lump sum where we worked with the client to fix prices, to fix quotes for equipment, material, before we arrived at a lump sum price. So we had the ability on that project to commit the material, place the orders, and have the numbers for that before we closed the book and made it a lump sum.

So no, we're not having any kind of escalation pressures that would threaten our lump sum on that project, or any of our other Power projects for that matter, because of the nature of the negotiation.

We are seeing increased cost pressure on a global basis as there is escalation both in terms of material and labor. But again when, we go in to bid a lump sum -- and this is true in any of our units -- we get fixed firm prices for the material into our lump sum bid quoted from our suppliers before we put our number together. That limits our exposure in that.

That is not a practice that is followed by everybody in market. David, if you want to comment?

Well, I would agree. I think that discipline is the key to our success in the lump sum pieces that we do have, and making sure that we do have those firm prices on material and equipment before we provide any lump sums.

The amount of escalation that we see in the marketplace has forced many of our customers to take on a different contracting method and more of a reimbursable costs method, which we are certainly very comfortable with. And is the predominant amount of our backlog -- is reimbursable costs.

But I think the key is the discipline that we use across the Company in getting into some of these things.

Just one more comment. When you look at some of the projects and the length of them, many of the projects that you have seen in the press that are challenged right now were bid prior to the big ramp-up of a lot of the commodity pricing; and they are suffering because of that.

Then on the Power, given that coal and nuclear costs have gone up, and even NRG has been negotiating on the STP with their vendors pretty heavily, are you seeing on a cost per kilowatt basis -- even from a lower base -- that gas-fired power, notwithstanding the surprises they're going to get on the cost of the gas, gas-fired power cost per kilowatt are rising as well? Is that something you are seeing?

Yes, I think it is safe to say that when the price of steel goes up or electrical cable, it affects any project that uses that commodity. So yes, the gas is going up as well on a cost per kilowatt based on the market prices for material and labor.

Then before I hop off, Mike, did you say -- I just need to clarify on slide 9 -- that Savannah River was under protest or was that a typo?

No, it is under protest.

By whom?

By the other bidding team, which is being led by URS Washington Group.

Okay. When is the decision due on that?

It is hard to say, typically there is a 100-day cycle on adjudicating these.

The 100 days would run out in May.

Thank you.

Graham Mattison with Lazard Capital Markets.

Good morning, guys, just a quick clarification. You mentioned that you are expecting two coal plants this year. Are these ones that you are waiting on an air permit for, or are these new projects?

No, no, I didn't say expecting; I said it is possible that we will get two. I would like to think that we are going to get one.

It is absolutely permits that are the key to that. So if we are fortunate and get both permits in, we will have two projects. But I am looking for one and that is what we're planning on.

Got you. Thank you. Then just a question on the polysilicon plant you guys are doing in China. I know you booked the FEED work on that in 3Q of last year with the expectation to book the EPCM work in 2008.

Any update on the timing or the possibility that might shift to 2009, given the weather and some of the other customer-specific constraints on that?

No, I don't see it shifting to '09. In fact, it is progressing quite nicely. I think it will be in '08. It will be part of '08.

Okay, great. Thank you very much.

(OPERATOR INSTRUCTIONS) John Rogers with D.A. Davidson.

Congratulations on the quarter as well. In the past you guys have talked about some markets that you are not in. I think you have mentioned offshore Oil & Gas and some other areas. You obviously have a lot on your plate.

But what are you thinking about in terms of just over the next couple of years, in terms of new segments or areas of expertise you would like to develop?

Well, it is not that we are not in offshore; we are. But it's an area we truly would like to strengthen and build more capability.

I would say and I have mentioned several times that our focus in terms of adding to our capability is in the areas of offshore Oil & Gas. It's in the Infrastructure arena; even though we have an extremely strong model there. We think the global effort in that is one that would fit us very nicely.

We will continue to look at adding to our capability on the nuclear side, both in terms of new power generation and in terms of remediation.

Okay, thank you.

Alex Rygiel with FBR Capital Markets.

Thank you. Two quick questions. First, Alan, in the past you have commented on your outlook for backlog expansion in the future. What are your thoughts on backlog at the end of '08 versus '07?

We will continue to grow backlog through 2008. If you look at what it is at today and project forward to a year from now, we will have grow the backlog through 2008.

Great. Two quick questions. Could you quantity or put in perspective the number of employees or the size and contribution of your effort in the South Texas nuclear project today?

On the nuclear project?

Right.

It is strictly an engineering effort today, doing conceptual work around support of the license application. I would say it is probably somewhere in the range of 50 to 60 people.

Lastly, could you comment on the domestic wind farm market and how active you are? Or whether or not it will ever develop to be a market that you are or want to be active in?

I think it is a market that is going to grow. I think clearly there is going to be some challenges, not the least of which is delivery of turbines for that business. Every turbine manufacturer in the world is pretty full from their shop space standpoint.

But I do think it's an area that we can play in, particularly as some of these grow in size and scale, which they would have to be to have an effect. That starts to get into areas where our size and strength and financial capability would be significant determining factor.

So it is an area we are looking at and I think to the extent that it develops as a market, we will be a player in it.

Excellent, thank you.

Barry Bannister with Stifel Nicolaus.

Mike, isn't a lot of your cash overseas? Doesn't that limit your maneuvering room on what you can do with the cash?

Barry, that was the case a couple years ago. Increasingly as we generate cash, more and more is in the US.

If you look at our $1.7 billion, roughly $1 billion of that is in the US and $700 million is overseas. So the mix has shifted. You are correct, that was the situation a couple years ago.

Okay. News reports that the NRC has tabled the COL application for South Texas, are they correct regarding maybe deficiencies in the application or negotiations on cost?

I think it has more to do with the participant list, and I really can't (inaudible) than that. But I don't think it will have an effect on the end date of the COL.

Okay, thank you.

It appears we have no further questions at this time. Mr. Boeckmann, I would like to turn the conference back over to you for any additional or closing remarks.

Thank you, operator. First of all let me thank everybody for participating on our call this morning.

As I said earlier, we posted our best year ever in 2007. But as you see from our increased guidance for 2008, we expect to continue to grow earnings at a healthy rate and to grow our backlog. We continue to be very upbeat about our markets and our prospects, and it will be another strong year.

We greatly appreciate your interest in Fluor and your confidence in our Company. Have a good day.

Thank you, ladies and gentlemen. Once again that does conclude today's conference. We thank you for your participation.